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FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the month of November, 2002
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Commission File Number: 333-100069
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NETEASE.COM, INC.
15/F, North Tower, Beijing Kerry Centre
No. 1 Guang Hua Road, Chao Yang District
Beijing, People's Republic of China
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.
Form 20-F X Form 40-F
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Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1):________________
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(7):________________
Indicate by check mark whether by furnishing the information contained in this
Form, the registrant is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes No X
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If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b):
82- N.A.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NETEASE.COM, INC.
By: /s/ Ted Sun
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Name: Mr. Ted Sun
Title: Chief Executive Officer and
Director
Date: November 6, 2002
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Press Release
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Contact for Media and Investors:
Ms. Xiang Nong Liang
NetEase.com, Inc.
xliang@corp.netease.com
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8610-6561-8811, ext. 338
Jessica Barist Cohen
Ogilvy Public Relations Worldwide
jessica.cohen@ogilvy.com
(+8610) 6443-6488 x.357
NetEase.com Announces Strong Third Quarter Results with
Continued Revenue Growth of 93.3% Over Preceding Quarter
Resulting in Record Gross Margins of 67.6%
Company achieves operating profit of RMB25.3 million (US$3.1 million) before
one-time charge of RMB36.0 million (US$4.35 million)
(Beijing - November 6, 2002) - NetEase.com, Inc. (Nasdaq: NTES), a leading
Internet technology provider in China, today announced financial results for its
third quarter ended September 30, 2002.
The Company reported total revenues of RMB74.4 million (US$9.0 million) for the
third quarter, a 93.3% increase over total revenues of RMB38.5 million (US$4.6
million) for the preceding quarter ended June 30, 2002 and an increase of
RMB67.2 million (US$8.1 million) over total revenues of RMB7.2 million (US$0.9
million) for the corresponding period in 2001.
Users of the NetEase Web sites continued to grow, with 80.7 million registered
accounts at the end of the third quarter, an increase of 23.8% over the 65.2
million accounts at the end of the previous quarter and a 141.6% increase over
the 33.4 million accounts at the same time a year ago.
Advertising revenues continued to increase, growing to RMB9.8 million (US$1.2
million) for the quarter ended September 30, 2002, representing a 21.8% increase
over RMB8.0 million (US$1.0 million) for the second quarter and a 133.3%
increase over RMB4.2 million (US$0.5 million) for the corresponding period a
year ago. Revenues from e-commerce and other services for the quarter were
RMB64.0 million (US$7.7 million), representing a 111.0% increase over the
preceding quarter's RMB30.3 million (US$3.7 million) and an increase of RMB61.0
million
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(US$7.4 million) over RMB3.0 million (US$0.4 million) for the corresponding
period a year ago. This increase in revenues from e-commerce and other services
was primarily attributable to continued growth in the Company's fee-based
services, including principally wireless short messaging services (SMS) and, to
a lesser extent, other fee-based online premium services, such as premium
e-mail, friend finding and dating services. Online games also drove revenue
growth due to the successful commercial launch of the two online games, "Priston
Tale" and "Westward Journey Online version 2.0," in August 2002.
The Company reported gross profit in the third quarter of RMB50.3 million
(US$6.1 million), increasing 128.8% over the previous quarter's RMB22.0 million
(US$2.7 million). The corresponding quarter last year had a loss on revenues of
RMB8.7 million (US$1.0 million). Strong revenue growth also favorably impacted
gross margins, which increased from 57.1% in the preceding quarter to 67.6% in
the third quarter. Total operating expenses decreased to RMB25.0 million (US$3.0
million), before a one-time charge of RMB36.0 million (US$4.35 million) for the
quarter which is discussed below, a 8.1% decrease from the previous quarter's
RMB27.2 million (US$3.3 million), and a 49.2% decrease from the corresponding
period a year ago of RMB49.2 million (US$5.9 million) before the one-time
charge.
As a result of the one-time charge, NetEase incurred an operating loss of
RMB10.7 million (US$1.3 million) in the third quarter, compared to an operating
loss of RMB5.2 million (US$0.6 million) in the previous quarter and RMB57.9
million (US$7.0 million) in the previous year's third quarter. Without taking
into account this one-time charge, the Company would have achieved an operating
profit of RMB25.3 million (US$3.1 million).
As a result of the one-time charge, the Company also incurred a net loss of
RMB9.0 million (US$1.1 million) or US$0.04 per American Depositary Share,
compared to the previous quarter's net profit of RMB38,300 (US$4,600) and the
net loss of RMB63.5 million (US$7.7 million) in the corresponding period a year
ago. Without taking into account this one-time charge, the Company would have
achieved a net profit of RMB27.0 million (US$3.3 million). The one-time charge
for the Company during the quarter represented a non-recurring expense of
RMB36.0 million (US$4.35 million) which is the aggregate amount of damages that
the Company has agreed to pay the plaintiffs to settle all claims in the class
action litigation filed in the U.S. District Court for the Southern District of
New York. The litigation was initiated in October 2001 against the Company,
certain members of its current and former officers and directors, and the
underwriters of Company's initial public offering, and claimed that the Company
and the other defendants had violated various U.S. securities laws by misstating
its revenue in the year 2000. The monetary settlement is subject to a number of
conditions, including the plaintiffs' completion of confirmatory discovery to
confirm that this settlement amount is fair and reasonable and approval of the
settlement by the District Court. The Company cannot predict if or when this
settlement will become final.
NetEase's cash balance was impacted by the payment of this settlement amount
into an escrow account in September, and as of September 30, 2002, the Company's
total net cash balance was RMB522.7 million (US$63.2 million), a 1.0% decrease
from the previous quarter's RMB527.8 million (US$63.8 million).
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The Company also announced that it has been cooperating with the U.S. Securities
and Exchange Commission in an informal inquiry by the Commission into the
circumstances surrounding the Company's restatement of its financial statements
for the year ended December 31, 2000 and related matters.
Commenting on these third quarter results, Ted Sun, acting Chief Executive
Officer and Director of the Company said, "We achieved impressive growth in
total revenues this last quarter, building on our operating momentum and
affirming the strength of our business model. Revenue from advertising services
enjoyed healthy growth even without the benefit of a major event like the World
Cup, and we have seen significant growth in our revenue from e-commerce and
other services as we continue to monetize the enormous user base of the NetEase
Web sites. We are committed to continuously developing new and creative online
services that satisfy the interests and needs of our expanding user base
through, for example, recent products launches such as our instant messaging
tool (popo.163.com) and avatar (face.163.com). We are also very pleased to see
the strong market receptiveness to our two online games that were commercially
launched during the last quarter. The encouraging results have reaffirmed the
success of our strategy to expand in the rapidly growing online game market. We
are committed to further enhancing our leading market position in this sector."
Denny Lee, NetEase's Chief Financial Officer added, "The achievement of an
operating profit before the one-time charge during this quarter is a significant
milestone for our company. During the third quarter, we continued to maintain
positive operating cash flow and strong revenue growth, resulting in significant
improvement in our gross margins. We are committed to maintaining sustainable,
long-term profitability through continued revenue growth and controlled
spending."
Mr. Sun continued, "While we are disappointed that the one-time, non-recurring
item relating to the settlement for the class action litigation has impacted our
ability to announce a profit this quarter, we are pleased that we have been able
to take this important step toward putting this suit behind us. Going forward,
we can continue to place our full attention on achieving future success,
maintaining sustainable growth for the Company and enhancing value for
shareholders."
Mr. Sun further added, "I would also like to thank Mary Nee, who stepped down
from our Board of Directors during the quarter. She has been a long supporter of
our Company and we appreciate her valuable contributions and ongoing guidance."
The Company's Board of Directors has not appointed a replacement to fill the
vacancy created by Mary Nee's resignation at this time.
** Note: The conversion of Renminbi (RMB) into U.S. dollars in this release is
based on the exchange rate of US$1 = RMB8.2774. The percentages stated in this
press release are calculated based on RMB.**
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About NetEase
NetEase.com, Inc. is a leading China-based Internet technology company that
pioneered the development of applications, services and other technologies for
the Internet in China. The NetEase Web sites, operated by a company affiliate,
organize and provide access to 18 content channels through distribution
arrangements with more than one hundred international and domestic content
providers. In addition, the NetEase Web sites offer a variety of products and
services, including Instant Messaging (Popo), Dating, Love, Alumni and Personal
Home Page. These products and services enable users to communicate about
interests and areas of expertise. The sites also offer online interactive
community services through 1,800 community forums. At the end of September 2002,
the number of simultaneous chat room participants reached 55,476 during peak
hours, and the number of registered users of the NetEase Web sites reached 80.7
million. The average number of daily pageviews was over 308 million in September
2002.
NetEase also offers online multi-player games, short messaging and e-mail
services, as well as auction and online mall technology services that provide
opportunities for e-commerce and traditional businesses to establish an online
e-commerce presence on the NetEase Web sites.
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This press release contains statements of a forward-looking nature. These
statements are made under the "safe harbor" provisions of the U.S. Private
Securities Litigation Reform Act of 1995. You can identify these forward-looking
statements by terminology such as "will," "expects," "anticipates," "future,"
"intends," "plans," "believes," "estimates" and similar statements. The accuracy
of these statements may be impacted by a number of business risks and
uncertainties that could cause actual results to differ materially from those
projected or anticipated, including risks related to: the risk that the
settlement of the class action litigation involving NetEase will not become
final for whatever reason, in which case NetEase may have to incur significant
additional expenses in defending against the litigation and possibly pay damages
in excess of the settlement amount; the risk that the online advertising market
in China will not continue to grow and will remain subject to intense
competition; the risk that NetEase will not be able to continue to successfully
monetize the user base of the NetEase Web sites and that its e-commerce and
other fee-based services revenues will not continue to grow; the risk that the
current popularity of SMS in China will not continue for whatever reason,
including SMS being superseded by other technologies for which NetEase is unable
to offer attractive products and services; the risk that NetEase may not be able
to continuously develop new and creative online services; the risk that the
online game market will not continue to grow or that NetEase will not be able to
maintain its leading position in that market; the risk that NetEase will not be
able to control its expenses in future periods; the risk that the trading price
of NetEase's American Depositary Shares may decrease for a variety of reasons,
some of which may be beyond the control of management; the possibility that
NetEase and its board of directors have not implemented effective or complete
steps to ensure that the circumstances which led to the restatement of NetEase's
financial statements for the year ended December 31, 2000 will not recur; the
risk that current or future appointees to management are not effective in their
respective positions; the difficulty in locating and recruiting suitable
candidates for middle and senior management positions; NetEase's ability to
develop and implement additional
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operational and financial systems to manage NetEase's operations; competition in
NetEase's existing and potential markets; governmental uncertainties, general
competition and price pressures in the marketplace; uncertainty as to future
profitability; the risk that security, reliability and confidentiality concerns
may impede broad use of the Internet and e-commerce and other services; and
other risks outlined in NetEase's filings with the Securities and Exchange
Commission, including its registration statement on Form F-1, as amended.
NetEase does not undertake any obligation to update this forward-looking
information, except as required under applicable law.
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Note 1: The conversion of Renminbi (RMB) into United States dollars (USD) is
based on the noon buying rate of USD1.00=RMB8.2774 on September 30, 2002 in The
City of New York for cable transfers of Renminbi as certified for customs
purposes by the Federal Reserve Bank of New York.
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Note 1: The conversion of Renminbi (RMB) into United States dollars (USD) is
based on the noon buying rate of USD1.00=RMB8.2774 on September 30, 2002 in The
City of New York for cable transfers of Renminbi as certified for customs
purposes by the Federal Reserve Bank of New York.
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